Tsakos Energy Navigation Limited (TEN) reported results (unaudited) for the first quarter ended March 31, 2012.
Revenues, net of commissions and voyage expenses amounted to $66.2 million in the first quarter of 2012, a 7% improvement over the fourth quarter of 2011. TEN operated an average of 48.0 vessels in the first quarter of 2012. However, this includes one vessel, the VLCC La Prudencia, which was not operating during the quarter in anticipation of a sale or conversion and the VLCC, La Madrina which is held for sale but performed operations. Excluding La Prudencia, the fleet utilization was 96.7%, a high level of productivity given the continued state of the market.
The average daily time charter equivalent (TCE) rate (voyage revenue less voyage expenses) was $17,129, which was an improvement of about 9.0% over the fourth quarter of 2011 due primarily to regional spikes in aframax freight rates and some increase in product carrier rates. However, these spikes were offset partially by bunker prices which were 10% higher than the average prices of 2011. A part of these costs, however, was recovered through our bunker hedges, which are included in finance costs.
All the vessels generated positive EBITDA in the first quarter of 2012 with the exception of the LNG carrier which was in dry dock and the two VLCCs which are held for sale. In total EBITDA amounted to $26.2 million in the first quarter of 2012.
Total operating expenses amounted to $35.5 million in the first quarter of 2012. This was higher than normal due almost entirely to dry-dockings in which additional non-deferrable expenditure was incurred, particularly with regards to the LNG carrier Neo Energy where special attention was given to the vessel prior to commencement of its new four-year charter at a very accretive rate. It is expected that from the second quarter of 2012, operating expenses will return to levels more comparable to the 2011 average expenditure level, aided by fewer dry-dockings and a strengthening of the US dollar against the Euro.
General and administrative expenses in the first quarter of 2012 were reduced to $0.8 million, due to savings in investor relations, promotional activities and office and sundry expenses.
Interest and finance costs were kept down to $10.3 million primarily due to positive valuation movements on interest rate and bunker swaps. Interest paid on interest rate swaps again amounted to approximately $7.7 million.
The first quarter of 2012 ended with a net loss of $8.8 million which, excluding the year-end impairment charges, was an improvement of about 50% over the fourth quarter result mainly due to better than expected market rates. The first quarter 2012 loss is attributable to a number of factors, apart from the general state of the freight market, including high bunker costs, high interest rate swap costs, exceptional dry-dock repair costs on five vessels, and continued losses on the two older VLCCs which are held for sale (albeit at a much reduced level). In the second quarter of 2012, we are seeing some improvement in the suezmax and VLCC rates, which should allow the VLCC La Madrina to cover much of its costs prior to its sale. Bunker costs have fallen slightly which should have some positive impact and there are only three vessels undergoing dry-dock in the second quarter of 2012. Seven of the interest rate swaps will expire in the latter part of the year providing some relief in 2013, although it remains our intention to hedge against interest rate volatility at more attractive levels.
Total cash and liquid investments amounted to $193 million at the end of the first quarter 2012, an increase of $9 million over the year-end balances. Total indebtedness remained at approximately the same level as of December 31, 2011. Finance (including pre-delivery) has been arranged for the first of the two suezmax DP2 shuttle tankers to be delivered in early 2013 and similar terms are nearing completion for the second shuttle tanker. We concluded a successful follow-on equity offering on April 18, 2012, and raised net proceeds of $62.7 million on the sale of ten million common shares. Offering proceeds will primarily be utilized for the initial installments of two LNG carriers, one of which we have already ordered. We have an option for the second which we expect to exercise in September 2012.
Subsequent Events On April 18, 2012, the Company concluded a follow-on public equity offering that raised, net of underwriting discount, $62.7 million on the issuance of 10 million common shares. The proceeds from the equity offering will be used primarily to fund growth initiatives, primarily in the LNG sector.
On April 17, 2012, the Company declared a quarterly dividend of $0.15 per share which will be paid today May 25, 2012 to shareholders of record May 21, 2012. TEN has paid a dividend every year since its listing on the New York Stock Exchange in March 2002. Since then, TEN has distributed a total of $9.375 per share in dividends against a listing price at that time of $7.50 per share, accounting for the 2-1 share split of November 14, 2007.
On April 12, 2012, the Company announced three and five year charters for two of its modern handysize product tankers to a major end-user. The contracts are expected to generate minimum gross revenues of $42 million over the duration of their respective contracts.
Strategy & Outlook In this challenging environment, TEN remained committed to its stated policy of balanced and flexible fleet employment which translated into high fleet utilization rates, operating efficiencies, cost containments and selective growth. The Company remains focused on its LNG presence with the placement of a one-plus-one newbuilding order while maintaining an interest in value opportunities as may surface in the conventional tankers market for modern tonnage. Further to that, management is exploring ways to enhance its presence in the developing shuttle tankers markets in order to solidify its involvement through the two shuttle tanker newbuildings with delivery in Q1 and Q2 2013.
Management remains optimistic for the long-term prospects of the tanker industry and will continue to position the Company both in terms of assets and employment patterns to benefit from an expected recovery in freight rates.
"TEN is prepared to take advantage of low market opportunities whilst making sure to comfortably navigate through current choppy waters," stated Mr. Nikolas P. Tsakos, President & Chief Executive Officer of TEN. "In doing so, we have continued to follow our tried and tested policy of a strong balance sheet, a long-term and flexible employment as well as the concept of operating a modern and diversified fleet. Cash preservation, dividends and opportunistic acquisitions remain a core in our strategy going forward. We feel that the modernity of our fleet coupled with our involvement in LNG and shuttle tankers will make such challenging quarters a mere aberration in our Company's 19-year history," Mr. Tsakos concluded.